US stocks rebound, yields fall as Fed's Powell soothes market

Global stocks prices closed flat and bond yields edged lower on Wednesday after US Federal Reserve Chair Jerome Powell soothed investor angst by saying a recent inflation spike will fade, helping lift the S&P500 to a fresh intra-day record.

Powell said in congressional testimony that high inflation was for goods and services tied to the reopening and the US economy was "still a ways off" from levels the Fed wanted to see before tapering its stimulus support.

Powell's remarks relieved investors who were concerned inflation data would prompt the Fed to signal the beginning of tapering, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

US producer prices surged in June to the largest annual gain in more than 10-1/2 years, the Labour Department said. A day earlier, it said consumer prices rose by the most in 13 years.

"Both the CPI yesterday and the PPI today came inconsiderab ly above expectations and signalled that inflation continues to run hot," Arone said. "Even in the face of that, Powell has stood steadfast."

The yield on the 10-year Treasury note slid 6.6 basis points to 1.3492 per cent, the dollar eased and stocks on Wall Street rose, though gains were pared at the close of trading.

MSCI's all-country world equity index closed slightly lower, down 0.03 per cent at 726.09, after earlier matching Tuesday's record intra-day high of 728.77. The broad pan-European FTSEurofirst 300 index slid 0.1 per cent to close at 1777.58, just below Tuesday's record high.

On Wall Street, the Dow Jones Industrial Average rose 0.13 per cent, the S&P 500 added 0.12 per cent and the Nasdaq Composite slipped 0.22 per cent.

Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.25 per cent as Chinese blue-chips fell 1.15 per cent. Japan's Nikkei dipped 0.38 per cent.

The Bank of Canada held its key overnight interest rate at a record low 0.25 per cent as expected and said it would cut its weekly net purchases of government bonds to a target of C$2 billion ($1.6 billion) from C$3 billion.

The US dollar edged lower against the Canadian dollar, down 0.01 per cent at 1.2508 per US dollar.

The New Zealand dollar shot up 0.92 per cent as markets bet an interest rate hike is imminent after the central bank on Wednesday unexpectedly announced it would end its bond purchase programme from next week.

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.4 per cent to 92.364.

The euro was up 0.5 per cent at $1.1836, while the yen traded down 0.6 per cent at $109.9600.

President Joe Biden's administration is still pushing for US fiscal stimulus. Late on Tuesday, Democrats on the Senate Budget Committee reached an agreement on a $3.5-trillion infrastructure investment plan they aim to include in a budget resolution to be debated this summer.

German 10-year Bund yields fell to -0.319 per cent after Germany sold 3.392 billion euros in a top-up of its 0.00 per cent 10-year Bund.

Oil prices dropped after Reuters reported Saudi Arabia and the United Arab Emirates had reached a compromise that should unlock a deal to boost global oil supplies as the world recovers from the coronavirus pandemic.

Brent crude fell $1.73 to settle at $74.76 a barrel. US crude settled down $2.12 at $73.13 a barrel.

US gold futures settled up 0.8 per cent at $1,825 an ounce.